Press Release No. 13/454

Press Release: IMF Mission Reaches Staff-Level Agreement on Fifth Review Under the SBA with Kosovo

November 18, 2013

An International Monetary Fund (IMF) mission, led by Mr. Johannes Wiegand, held discussions with the Kosovar authorities during November 6-18, 2013, as part of the fifth and final review of the country’s economic performance under the Stand-By Arrangement (SBA). At the conclusion of the visit, Mr. Wiegand made the following statement:

“The mission reached staff-level agreement with the authorities on a package of policies that aims at completing the fifth review under the SBA. Consideration by the IMF’s Executive Board is tentatively scheduled for mid-December. The completion of this review will enable Kosovo to draw SDR 4.251 million (about €5 million). However, in line with their intent to treat the arrangement as precautionary in 2013, the Kosovar authorities plan not to draw this amount.

“Kosovo’s economy has continued a pattern of subdued but resilient growth in 2013. For 2014, IMF staff projects a recovery of real GDP growth to around 4 percent, in line with developments in Diaspora host countries. Inflation remains contained. The banking system continues to be stable and liquid. Risks ahead relate in particular to the uncertain external environment.

“Macroeconomic and financial policies have remained broadly on track. All end-August quantitative performance criteria were met, as a shortfall in revenue collection was overcompensated by spending restraint, notably on the capital budget. Good progress has also been made regarding the applicable structural benchmarks. In particular, the 2014 budget submitted to the assembly at end-October is consistent with sound fiscal management. Among other things, it includes an allocation to start construction of highway R6 to Skopje, and a public sector wage increase that can be sustained both in 2014 and in future years. The budget also safeguards an adequate level of the government bank balance.

“In the past 2½ years, Kosovo has made significant progress in strengthening macroeconomic management. A sustainable fiscal stance has been restored and locked in with the passage of a rules-based fiscal framework in July 2013, progress has been made with the preparation and costing of spending initiatives, and the central bank has acquired stronger tools to supervise and regulate the financial system, as well as provide liquidity assistance to banks if needed. The authorities have expressed interest in a successor arrangement once this SBA expires (on December 26).”